According to FOX Business reporter Eleanor Terrett's tweet earlier today (11th), two Federal Reserve governors are undergoing a major shift in their attitudes towards cryptocurrencies.
In two speeches last Friday, Republican Fed governors Michelle Bowman and Christopher Waller both expressed a more "open" stance on digital assets and their future in the financial system.
Their remarks are noteworthy because:
1) Trump may choose one of them to replace Michael Barr as the next vice chair responsible for supervision, who will oversee regulatory affairs and the Fed's interactions with banks and cryptocurrencies.
2) Their statements represent a change in their tone and attitude towards cryptocurrencies, as both previously voted to make it harder for banks to engage with cryptocurrencies, and also voted against Custodia, a digital asset bank, becoming a member of the Federal Reserve System.
Two Fed Governors Shift Stance on Crypto
Terrett's tweet noted that Bowman emphasized the importance of clear and reasonable regulation in her February 7th speech, regulation that should encourage rather than suppress financial innovation. She acknowledged that past regulatory approaches, such as over-de-risking, have not been effective for emerging technologies like cryptocurrencies.
Bowman also stated that "soft power regulation" should not be used to impede the development of new technologies, and warned that an excessive focus on safety and soundness could threaten long-term innovation in the banking system.
Banking regulatory policies should meet the needs of the unbanked, expanding the reach of banking services. It should not be used to restrict or exclude legitimate customers and businesses from accessing banking services.
Waller, on the other hand, recently stated that as long as there is good regulatory support, stablecoins will expand the influence of the US dollar and reinforce the dollar's status as the world's reserve currency, complementing the US's existing payment systems on other tracks.
Further reading: Fed's Waller: Stablecoins Could Bolster Dollar's 'Global Reserve Currency' Status, No Need for Central Bank CBDC
Likelihood of US Establishing Bitcoin National Reserve Heats Up
Although Fed Chair Jerome Powell stated in December that the Fed has no intention of participating in any government efforts to establish a Bitcoin reserve, and that from a legal perspective, "the Fed is not permitted to hold Bitcoin," he said this is something Congress would need to consider, "but we have no intention of seeking to change the law."
However, now two of the seven members of the Federal Reserve Board, the Fed's highest decision-making body, are showing signs of a more relaxed stance on cryptocurrency regulation, and one of them has a high probability of becoming the vice chair responsible for regulatory affairs. This has led to optimistic expectations that the Fed's cautious attitude towards cryptocurrencies may trend towards openness, and its stance on a Bitcoin strategic reserve may also shift.
Recently, there have also been multiple signals indicating that former President Trump's plan to establish a national Bitcoin strategic reserve is "for real," including the issuance of an executive order to conduct research and evaluation, and instructions to the Treasury and Commerce Departments to establish a US sovereign wealth fund within the next 12 months, which the community speculates may be paving the way for a Bitcoin reserve.
Additionally, multiple US states are actively pushing for legislation to establish their own Bitcoin reserves, and Cynthia Lummis, the Republican Senator from Wyoming who last year proposed that the US purchase 1 million BTC within 5 years, was recently elected as the chair of the Senate Banking Subcommittee on Digital Assets, further increasing the likelihood of the US establishing a Bitcoin reserve.
Polymarket: Likelihood of US Establishing Bitcoin Reserve in 2025 Reaches 43%
The latest data from the popular prediction market Polymarket shows that the probability of the US establishing a national strategic Bitcoin reserve by 2025 is currently around 43% (it had previously dipped below 40%).
The historical high was 65% on January 17th. If the prediction comes true, the establishment of a US Bitcoin national reserve could potentially be the biggest catalyst for the cryptocurrency market this year.
